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US Manufacturing Sector Stabilizing

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From Reuters

U.S. manufacturing output increased for a second straight month in October amid gains in the production of motor vehicles and a range of other goods, suggesting that the battered factory sector was slowly recovering.

Other data on Wednesday showed a moderation in producer inflation last month. Still, the disinflationary impulse is ebbing as oil prices rise and the dollar’s rally fades, which could see an increase in price pressures in the coming months.

The Federal Reserve said factory production rose 0.2 percent last month after a similar gain in September. Output was supported by a 0.9 percent rise in the production of motor vehicles and parts. There were also increases in the production of primary metals and computers and electronic products.

“With the global economic backdrop more stable and growth set to pick up in the United States, we expect to see activity in the manufacturing sector improve a bit in the coming months,” said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina.

The report added to a survey early this month showing a second straight month of expansion in factory activity in October. Manufacturing accounts for 12 percent of the U.S. economy.

The sector has suffered a prolonged slump in the aftermath of the dollar’s surge between June 2014 and January this year, which has constrained exports. Activity has also been hurt by the collapse in oil drilling after oil prices plunged.

Despite signs of improvement, gains in manufacturing output will likely remain modest against the backdrop of a still-strong dollar and sluggish global demand.

Heavy machinery maker Caterpillar last month lowered its full-year revenue outlook for the second time this year. It said an “abundance” of used construction equipment, a “substantial” number of idle locomotives and a “significant” number of idle mining trucks had undercut demand.

Longer-dated U.S. government bonds were trading higher, while the dollar was little changed against a basket of currencies. U.S. stocks fell marginally.

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